RANTING ANDY – This weekend, we learned that PBOC (People’s Bank of China) governor Zhou Xiaochuan stated that the country’s excessive stockpile of U.S. dollar reserves has to be urgently diversified, a statement directly followed by comments from Xia Bin, a member of the PBOC’s monetary policy committee, that $1 trillion would be sufficient. Moreover, following those comments, Tang Shuangning, chairman of China Everbright Group, said China should reduce its excessive foreign exchange reserves to a level between $800 billion and $1.3 trillion. Given that China currently owns $3 trillion dollars of reserves, you can do the math of what they intend to sell.
Meanwhile, the world’s second largest holder of U.S. currency reserves and Treasury Bonds, Japan, is continuing to spiral downwards in the aftermath of perhaps the worst natural disaster to strike a densely populated area in centuries (although you wouldn’t know it from reading U.S. media reports). Apparently, the head of the bank of Japan, Maasaki Shirakawa, stated this weekend that he believes Japan will see NEGATIVE GDP growth in the June and September quarters, a shocking statement coming from someone of his level of power. Which of course means massive additional amounts of Japanese-style QE, ad infinitum.
Not only that, but the Japanese Government Pension Investment Fund (GPIF) announced that it is seeing a huge shortfall in funds available for payouts, and is thus preparing for near-term asset liquidations. The GPIF has $1.4 trillion of assets, larger than the entire economies of India and China, yet needs to start liquidating assets ASAP, and you KNOW that U.S. Treasury bonds will be among those assets sold.
So let’s see – the two largest holders of Treasury Bonds in the WORLD, BY FAR, are both preparing for massive liquidations just as U.S. QE2 is expected to wind down in June. Of course it won’t, be it covert or overt, but Bernanke, Geithner and company appear more and more likely to be forced to publicly acknowledge a continuation of this policy, in other words QE3. And not only that, China is preparing to not only sell Treasuries, but essentially ANYTHING dollar-denominated in its portfolio in exchange for “resources and technology needed for the real economy” (i.e. gold, oil, and anything of REAL VALUE they can get their hands on).
The time to PROTECT YOURSELF from hyperinflation is quickly running down. The national average for gasoline prices hit $3.86/gallon this week (for regular gas), including $4.22/gallon in California and $4.07/gallon in New York, and even the CEO of Wal-Mart last month stated that Americans should expect across-the-board “serious inflation” starting in June.
The U.S. dollar index (DXY), although a poor indicator of dollar inflation versus items of REAL VALUE such as gold, oil, and food, is only 3% from breaking its all-time low, a low that, mind you, has been supported by major global intervention for the past 25 years. And when it breaks, it could easily waterfall dramatically, unleashing dramatic price rises in nearly every essential item of daily life.